When the consumption of a good creates an external benefit,
A) the quantity produced in an unregulated, competitive market is greater than the efficient quantity.
B) the marginal social benefit curve lies above the marginal private benefit curve.
C) the marginal social cost curve lies below the marginal private cost curve.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

When a good's consumption creates an external benefit, the marginal social benefit (MSB) of consuming the good is greater than the marginal private benefit (MPB), meaning the MSB curve lies above the MPB curve. This reflects the additional benefits to society that are not captured by the private market.

When the Consumption of a Good Creates an External Benefit